Five retailer trends in Asia for a post-pandemic world

Nearly 500 online retailers were surveyed in late 2020 for their experience during the pandemic and from the subsequent Resilience in Retail study, payments platform Stripe lists the trends in APAC retail as the world emerges from COVID-19.

• Retailers going international will have to manage multiple forms of payment when entering new markets.
• The right technology solutions and partners can help make global reach seamless and localise customer experiences.
• But going global exposes retailers to new fraudulent attacks as well as the high cost of preventing them.

Why it matters

Amid the growth of mobile commerce and plans to expand internationally, APAC retailers are facing various challenges such as preventing fraudulent attacks and adopting new payment methods.

Takeaways

• APAC retailers are embracing new business models like subscription to supplement their core business.
• Mobile commerce is big in Asia but retailers must optimise the experience to reduce mobile cart abandonment.
• Wallets, contactless and buy now pay later (BNPL) are becoming popular in APAC as digital payments accelerate.

China is poised to be the first market in world history where online commerce sales will surpass physical retail, with the country expected to reach this milestone this year, Jon Stona, Stripe’s head of marketing in Asia-Pacific, observed at the recent eTail Asia Virtual Summit.

“By 2023, we expect online retail sales in Asia to be more than the rest of the world’s online sales combined," he added.

The retail e-commerce opportunity may sound like a boon for the region as it makes its COVID-19 recovery but Stona said there is a catch: the shift has also brought about a significant increase in competition.

“The space is much more crowded. What makes things even more complex is that here in Asia, we have the worst loyalty in terms of our customers.

According to a 2019 global consumer study by Nielsen, consumers in APAC have the highest brand-switching propensity globally, with nearly half (47%) willing to switch brands or try different products.

“You have this massive opportunity but at the same time, you have this increased competition in a world where loyalty is starting to decrease,” Stona said.

Retailers, he added, are also facing additional challenges posed by the pandemic, such as demand fluctuations and supply chain disruptions, in line with markets entering lockdown and reopening at different periods. Operating according to the latest government regulations and restrictions, for instance, is another challenge that retailers have had to grapple with.

Referencing the Stripe-commissioned Resilience in Retail study by Forrester Consulting from late 2020, Stona laid out five trends the payments platform is seeing from APAC retailers as they prime themselves for the postpandemic world.

Trend 1: Eye on international growth

International expansion is on APAC retailers’ minds. The research surveyed close to 500 retailers in late 2020 and found over half (51%) of respondents are looking into geographical expansion.

“It’s not surprising, given the importance of cross-border commerce and the need to hedge risk,” said Stona. “The downside though, is that the majority (54%) also find new market expansion to be quite challenging due to a number of reasons. There are multiple forms of payment if you want to enter new markets – how can you truly be local in order to go global? Consumer expectations also vary by market and regulations in APAC are quite frankly disjointed.”

For retailers looking to navigate this complexity and scale quickly, he advised seeking out the right technology solutions and partners to help make global reach seamless, reduce regulatory complexities and localise customer experiences.

“The research is also telling us that roughly half of respondents don’t have all the expertise in-house.”

He expected outsourced partnerships to help streamline international expansion. “Retailers can then focus on their core business and not have to worry about understanding compliance in one market and another market.

Trend 2: Battling increased fraud attacks

“Going global opens you up to new fraudulent attacks,” said Stona. “We are seeing from the research as well that nearly a third (31%) of APAC retailers have experienced increased fraud attempts.”

The trouble with fraud, naturally, are the high costs that add up for businesses.

“In one scenario, fraudsters get through and you’re stuck with the cost of goods sold and the dispute fees. Then you might have another scenario where legitimate customers are being blocked, in which case you forego the profit margin of the goods that you could have sold.”

Then there is also the operational cost of managing frauds, such as the chargebacks and investigations.

Within APAC, however, retailers are making the common mistake of not taking the threat of fraud proactively until it is too late.

“They wait until the incident has happened and sometimes that can be too costly for the business to recover from.”

APAC retailers also often use fraud prevention solutions that either make use of machine learning or are rulebased.

“Both of these are good. But they are really good when they are combined because fraud prevention needs to be personal and adapted – it should be customised to allow you to have thresholds in behaviour based on your unique business.”

Stona said machine learning is only as strong as the data on which it trains on.

“Make sure it is training on a very large global dataset across multiple datasets from multiple industries, multiple models and multiple countries. That’s where you are going to get the most dynamic protection.”

Trend 3: Adopting new payment methods

Wallets, contactless and buy now pay later (BNPL) are the current rage in APAC with the acceleration of digital payments.

“Gone are the days where Asia was primarily a cash economy," said Stona. “Now, we are seeing nearly 50% of payment happening through wallets."

Forrester’s study shows that 75% of APAC consumers intend to continue making contactless payments even after the pandemic is over.

"We saw a massive bump in terms of contactless adoption in the past 18 months, and it doesn’t look like it is going away anytime soon.”

BNPL services, a fast-growing area that is anticipated to account for 12% of global e-commerce spend based on a 2020 forecast by market research firm Kaleido intelligence, are also increasingly popular within the region and adopted by retailers.

One way that APAC retailers are driving revenue with little effort is through integrating a local payment method. Based on Stripe’s data, adding a local payment method can deliver serious uplift with a high 79% increase in payment volume.

He said many retailers are really starting to realise how critical local payments are and foresees even more following this trend, particularly with the diversity of markets in APAC.

A pilot that Stripe did with some Hong Kong-based retailers – who went into e-commerce sales in the Netherlands – saw good results when they started offering iDEAL, a major local online payment method for the market.

“After implementing iDEAL and allowing their customers in the Netherlands to pay with it, there was nearly an 80% increase in payment volume for these Hong Kong retailers selling into the Netherlands.”

Trend 4: Expansion to new business models

Amidst these times of uncertainty, retailers have had to be creative as they experiment with business models.

“They are trying to find new forms of revenue to supplement their existing core business."

From its research, Stripe found 55% of retailers in Asia are adopting new business models like subscription. “Maybe you are direct-to-consumer and you might be thinking of an annual subscription or a monthly subscription.”

APAC retailers are also looking towards the marketplace model, he added. Marketplaces already accounted for 47% of digital B2C commerce transactions as far back as 2018, according to market research company Euromonitor International. The size of this opportunity is immense, with sales on online marketplaces expected to exceed US$7 trillion by 2024, based on analysis by financial services advisory firm iBe.

“Whether it’s Alibaba, Rakuten, Tokopedia, Shopee, Lazada or Cold Storage, we have the rise of mega marketplaces here in APAC.

Trend 5: The growth of mobile, social and livestreaming

Mobile, social commerce and livestreaming are continuing to grow, and APAC retailers are certainly taking note.

“Asia is leading in these new ways to sell. We are hearing of entire shopping mall chains that had to shut down during the pandemic. They had livestreaming days for physical retailers to sell through livestreaming.”

Mobile commerce, in particular, is where Asia is coming into its own. “Unlike North America or Europe, over three-quarters of online retail sales (76%) happen on a smartphone here in Asia. By 2024, we are looking at m-commerce being close to US$2 trillion.”

However, mobile cart abandonment is typically twice that of desktop. "It doesn’t make sense because most consumers are likely to come in through mobile. You should be putting more emphasis on optimising your mobile. The takeaway is to improve your mobile experience. Don’t let your mobile experience fall though.”

Integrating the likes of Apple Pay, Google Pay and Samsung Pay is one way retailers are circumventing this tolessen customer friction at checkout – customers can go ahead to authorise payments and provide payment information such as card number, billing and shipping address, and phone number quickly with ease.

“These can at times double your conversion rate. Don’t take your mobile checkout for granted.”